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AbstractThis paper investigates whether private equity (PE)‐backed acquirers have a "parenting advantage" in the mergers & acquisitions (M&A) market. We employ a sample of 788 PE‐backed firms and a carefully matched control group of 6,652 non‐PE‐backed peers, for which we observe the entire acquisition history over a 19‐year time span. Difference‐in‐differences estimates suggest that PE backing induces a sizeable but short‐lived boost to acquisition activity, while the type and complexity of acquisitions are similar to those of non‐PE‐backed peers. These results are consistent with the idea that PE backing enhances execution and speed in the M&A market. We find that portfolio firms benefit from this boost through improved valuations and margins. The extent to which this is true, however, depends on the institutional setting of the PE owner. Our results indicate that add‐on acquisitions are detrimental if PE owners are late buyers or suffer from limited attention problems.

This paper explores whether and how political connections affect the likelihood of completing a cross-border M&A deal for Chinese publicly listed, but privately-owned enterprises (POEs) and the resulting firm performance. In line with our proposed political connection trade-off theory, we find that POEs with politically connected top managers are more likely to complete a cross-border M&A deal than POEs with no such connections, but that this comes at the cost of negative announcement returns and subsequent lower accounting performance. These findings support the idea that politically connected top managers engage in "political empire building" behavior at the cost of shareholders' wealth.